EAST JAVA: INAUGURATION OF HESS PROJECT CANCELLED BY

UNCLAS SURABAYA 000073

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR EAP/MTS, EB/ESC, DS/IP/EAP, CA

E.O. 12958: N/A
TAGS: ASEC EPET ID
SUBJECT: EAST JAVA: INAUGURATION OF HESS PROJECT CANCELLED BY
PEACEFUL DEMONSTRATION


This message is sensitive but unclassified. Please protect
accordingly.


1. (SBU) On November 15, beginning at approximately 1100,
hundreds of demonstrators blocked the entrance to the Hess
Onshore Processing Facility in Gresik, north of Surabaya,
demanding Hess (the facility's operator) discontinue operations.
The protestors, residents of three villages surrounding the
facility, complained that Hess was ignoring local needs by
failing to establish a community development project and was
polluting the surrounding area without regard to the health and
safety of residents. The demonstration, which lasted until
1730, blocked access to the facility by the American Citizen
President of Amerada Hess, the Minister of Energy and Mineral
Resources Purnomo Yusgiantoro, and other officials, causing the
planned inauguration of the Ujung Pangkah Field to be cancelled.
PO Surabaya was inside the facility during the first three
hours of the demonstration.


2. (SBU) Despite substantial local police presence, the
demonstrators were able to reach the gates of the facility and
hang English-language banners criticizing the Amerada Hess
president by name. They chanted anti-American and anti-Hess
slogans, sang songs, and demanded a meeting with Hess's
president. Hess officials provided demonstrators with water and
erected a tent to protect demonstrators from the sun. According
to local police officials, the demonstration broke up after Hess
representatives announced the establishment of a community
development fund of Rp 300 million (USD 32,000) to be utilized
in the three surrounding villages.


3. (SBU) Hess employees admitted to PO that Hess had been slow
to initiate a community development program in the area. They
added that the complaints about pollution stemmed from recent
problems with the gas flare at the facility. Gas produced at
Ujung Pangkah has a high H2S content, that must be scrubbed
before processing. Due to design problems with the flare, and a
failure of temporary measures to remove the H2S in recent weeks,
a strong smell of sulfur had led to complaints by local
residents. Hess employees insisted that there was no health
risk, but admitted that the smell was unpleasant. Hess is
bringing in new equipment to eliminate the problem.


4. (U) No property was damaged and no personnel injured during
the demonstration. The local police chief and his senior
officials consulted closely with Hess officials and with
Surabaya RSO during the incident and facilitated PO's departure
with a police escort.

Project Background
--------------


5. (SBU) Amerada Hess, the field operator, has a 75% stake in
the Ujung Pangkah PSC, offshore East Java. Kuwait Foreign
Petroleum Exploration Co is a minority partner. BPMIGAS, the
Indonesian Government agency which regulates the upstream
petroleum sector on behalf of the government, is a silent
partner. Currently, Hess supplies approximately 17.5 million
cubic feet per day (MMCFD) of natural gas to the state
electricity firm PLN under a 20-year contract for its Gresik
power plant. Hess officials tell us they will reach peak
production of 100 MMCFD in the coming months. They also plan to
produce 6,000 barrels per day of liquid propane gas from the
block by late 2009.

MCCLELLAND